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Exhibit 10(v)
OPTION AGREEMENT
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(NON-QUALIFIED STOCK OPTION)
This Option Agreement ("Agreement") is made as of the 28th day of
February, 2001, between FanZ Enterprises, Inc., a Delaware corporation
(hereinafter called the "Company"), and Xxxxxxx X. Xxxxxxxxxx, a consultant of
the Company or one or more of its Subsidiaries (hereinafter called the
"Consultant").
WHEREAS, the Company and the Consultant have entered into an Employment
Agreement dated FEBRUARY 28 , 2001 (the "Employment Agreement"), pursuant to
which the Consultant will be engaged as the Chief Financial Officer of the
Company upon the consummation of the Company's initial public offering with
proceeds of at least $10,000,000.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the parties hereto
have agreed, and do hereby agree, as follows:
1. GRANT OF OPTION. The Company hereby grants to the Consultant the
right and option (hereinafter called the "Option") to purchase all or any part
of an aggregate of 500,000 shares of the common stock, $.01 par value, of the
Company ("Shares") on the terms and conditions set forth herein.
2. TYPE OF OPTION. The Option granted under this Option Agreement is a
Non-Qualified Stock Option and shall not be treated by the Company or the
Consultant as an Incentive Stock Option for federal income tax purposes.
3. OPTION PRICE. The option price of the Shares covered by the Option
is $3.00 per Share.
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4. TERM OF OPTION. The term of the Option shall be for a period of ten
(10) years from the date hereof, subject to earlier termination as hereinafter
provided.
5. EXERCISE OF OPTION.
(a) Prior to its expiration or termination, and except as provided
in Section 5(b) below, the Option may be exercised within the following time
limitations:
(i) On and after the date hereof, the Option may be
exercised as to not more than 250,000 of the Shares originally
subject to the Option.
(ii) On and after the first anniversary of the date of
this Agreement, the Option may be exercised as to not more
than an aggregate of 312,500 of the Shares originally subject
to the Option.
(iii) On and after the second anniversary of the date of
this Agreement, the Option may be exercised as to not more
than 375,000 of the Shares originally subject to the Option.
(iv) On and after the third anniversary of the date of
this Agreement, the Option may be exercised as to not more
than 437,500 of the Shares originally subject to the Option.
(v) On and after the fourth anniversary of the date of
this Agreement, the Option may be exercised as to any part or
all of the Shares originally subject to the Option.
(b) Notwithstanding anything to the contrary herein, in the event of
the sale of substantially all of the assets of the Company, the Option may be
exercised in full at any time during the ten (10) day period ending on the
closing of such transaction.
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(c) In order to exercise the Option, the person or persons entitled to
exercise it shall deliver to the Company written notice of the number of full
Shares with respect to which the Option is to be exercised. Such notice shall be
delivered to the attention of the President of the Company, or such other person
as the Board of Directors of the Company (the "Board"), or any committee
appointed by the Board which is invested with the responsibility of
administering this Agreement (the "Committee"), if one has been appointed, shall
designate. Unless (i) the Company, in its discretion, establishes "cashless
exercise" procedures, and (ii) the Board, or the Committee if one has been
appointed, in its discretion, permits the person or persons entitled to exercise
the Option to utilize such "cashless exercise" procedures, the notice shall be
accompanied by payment in full for any Shares being purchased. Such payment
shall be in cash or, upon approval of the Board, or the Committee if one has
been appointed, by certificates of Shares held for more than six (6) months,
duly endorsed in blank, equal in value to the purchase price of the Shares to be
purchased based on their Fair Market Value on the date of exercise or, upon
approval of the Board or the Committee, as the case may be, by a combination of
cash and Shares. For purposes of this Agreement, "Fair Market Value" shall mean,
with respect to the Shares, the fair market value determined in good faith by
the Board, or Committee, if one has been appointed, in its discretion, which
determination may, but need not, be based on (i) the advice of an independent
financial advisor (which may be the Company's regular outside auditors) or (ii)
the last known price per share paid by a purchaser in an arm's length
transaction; provided, however, that if there shall be a public market for the
Shares, Fair Market Value shall mean (i) the closing price of the Shares on the
principal stock exchange on which Shares are then traded or admitted to trading,
on the last business day prior to the date on which the value is to be
determined, (ii) if no sale takes place on such day on any such exchange, the
average of the last reported closing bid and asked prices on such day as
officially quoted on any such exchange, or (iii)
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if the Shares are not then listed or admitted to trading on any such exchange,
the average of the last reported closing bid and asked prices on such day on the
over-the-counter market. For purposes of (i) above, the National Association of
Securities Dealers National Market System shall be deemed a principal stock
exchange. If there shall be a public market for the Shares, and the foregoing
references are unavailable or inapplicable, then the Fair Market Value shall be
determined on the basis of the appropriate public market price indicator as
determined by the Board or Committee, if one has been appointed, in its sole
discretion.
(d) No Shares shall be issued until full payment therefor has been
made, and the Consultant shall have none of the rights of a shareholder in
respect of such Shares until full payment therefor has been made.
6. NONTRANSFERABILITY. The Option shall not be transferable, other
than: (a) to a trust established by the Consultant for estate planning purposes,
or (b) by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the holder of the Option, only by him, or in
the event of death, his Successor, or in the event of disability, his personal
representative, or (c) pursuant to a qualified domestic relations order, as
defined in the Internal Revenue Code of 1986, as amended (the "Code") or the
Employee Retirement Income Security Act of 1974 ("ERISA") or the rules
thereunder.
7. TERMINATION OF EMPLOYMENT. Notwithstanding anything to the contrary
in this Agreement, the Employment Agreement and any other existing or future
agreement between the Company and the Consultant, in the event of any
termination of the Consultant's employment with the Company:
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(a) for Cause (as defined in Section 7(b) of the Employment
Agreement, the Option, to the extent not theretofore
exercised, shall terminate as of the date of such termination,
or
(b) for "Not For Cause" (as defined in Section 7(e) of the
Employment Agreement, including Resignation with Good Reason
(as defined in Section 7(f)(ii) of the Employment Agreement))
the Option, to the extent not theretofore exercised, may be
exercised in full at any time during the one (1) year
severance period following such termination but not beyond the
original term of the Option, or
(c) for any other reason other than Section 7(a) and 7(b) above,
Death, Disability, Retirement or Change of Control as further
described herein then (i) the Option may be exercised by the
Consultant at any time after the date on which his employment
terminated, but not beyond the original term of the Option,
and (ii) the portion of the Option that has not vested as of
the date of the termination of the Consultant's employment
with the Company terminated shall automatically terminate as
of the date of termination of employment.
Once the Consultant becomes an employee of the Company and so long as
the Consultant shall continue to be an employee of the Company or one or more of
its Subsidiaries, the Option shall not be affected by any change of duties or
position. Nothing in this Option Agreement shall confer upon the Consultant any
right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any such Subsidiary to
terminate his employment at any time. Anything contained herein to the contrary
notwithstanding, in the event of the termination of the Consultant's employment
for Cause, the Option, to the extent not theretofore exercised, shall terminate.
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8. DEATH OF CONSULTANT. If the Consultant shall die while he shall be
employed by the Company or one or more of its Subsidiaries, or within three (3)
months after the termination of his employment other than for Cause, then (a)
the Option may be exercised by the Consultant's Successor (to the extent the
Consultant shall have been entitled to do so at the time of his death) at any
time within one (1) year after the date of the Consultant's death, but not
beyond the term of the Option, and (b) the portion of the Option that has not
vested as of the date of the Consultant's death shall automatically terminate as
of the date of the Consultant's death.
9. DISABILITY OF CONSULTANT. If the employment of the Consultant shall
terminate on account of his having become "disabled", as such term is defined in
Section 7(c) of the Employment Agreement, then (a) the Option may be exercised
(to the extent as of the date of the termination of Consultant's employment by
reason of having becoming disabled) by the Consultant or the Consultant's
personal representative, as the case may be, at any time within one (1) year
after the date on which the Consultant's employment terminated by reason of his
disability in accordance with the terms of the Employment Agreement, but not
beyond the original term of the Option, and (b) the portion of the Option that
has not vested as of the date of the termination of the Consultant's employment
by reason of his having become disabled shall automatically terminate.
10. RETIREMENT OF CONSULTANT. If the employment of the Consultant shall
terminate by reason of retirement entitling the Consultant to early, normal or
late retirement benefits under the provisions of any retirement plan of the
Company or a Subsidiary in which the Consultant participates (or if no such plan
then exists, at or after age sixty-five (65)), then (a) the Option may be
exercised by the Consultant (to the extent he shall have been entitled to do so
as of the date of his termination of employment by reason of retirement) at any
time after the date on which his
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employment terminated by reason of his retirement, but not beyond the original
term of the Option and (b) the portion of the Option that has not vested as of
the date of the termination of the Consultant's employment by reason of his
retirement shall automatically terminate as of the date of Consultant's
retirement.
11. CHANGE IN CONTROL. Notwithstanding anything to the contrary in this
Agreement, including Section 7 hereof, in the case of a Change in Control of the
Company:
(a) If the Change in Control of the Company is described in
Section 11(c)(i) or 11(c)(ii) hereof, the Board, or Committee if one
has been appointed, may, in its discretion, taking into account the
purposes of this Agreement, determine, on a case by case basis, that
this Option shall, subject to the following provisions, terminate
ninety (90) days after the Board becomes aware of the occurrence of
such Change in Control but, in the event of any such termination, the
Option holder shall have the right, commencing at least five (5) days
prior to such Change in Control and subject to any other limitation on
the exercise of such Option in effect on the date of exercise to
immediately exercise any Options in full, without regard to any vesting
limitations, to the extent they shall not have been theretofore
exercised.
(b) If the Change in Control of the Company is described in
Section 11(c)(iii) hereof, then (i) the Board, or Committee if one has
been appointed, shall use its best efforts to cause the acquiring or
successor entity to either assume all outstanding Options granted
hereunder or to replace all outstanding Options granted hereunder with
comparable options which preserve the spread, exercise period and
vesting periods of such Options; (ii) all outstanding Options granted
hereunder that are not so assumed or replaced with comparable options
shall become exercisable in full immediately prior to, and conditioned
upon, the closing of the transaction (a "Corporation Transaction") the
approval of which resulted in a
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Change in Control described in Section 11(c)(iii) hereof and written
notice of such acceleration shall be given to the holder of all
non-assumed or non-replaced Options at least ten (10) days prior to the
date of the closing of the Corporation Transaction; and (iii) all
outstanding Options granted hereunder shall automatically terminate
upon the closing of the Corporation Transaction.
(c) "CHANGE IN CONTROL" means a change in control of the
Company as a result of the occurrence of any of the following events:
(i) any person (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than an Exempt
Person (an "Acquiring Person") is or becomes the beneficial
owner, directly or indirectly, of Shares of the Company
representing more than fifty percent (50%) of the combined
voting power of the Company's then outstanding voting
securities, other than either in connection with an issuance
of Shares or series of related issuances of Shares approved by
the Board (which Board must include at least a majority who
were Continuing Directors and which transaction or series of
related transactions must have been approved by a majority of
the Continuing Directors) or as the result of the reduction in
the number of issued and outstanding Shares pursuant to a
transaction or series of related transactions approved by the
Board;
(ii) there shall cease to be a majority of the Board
comprised of Continuing Directors; or
(iii) (A) the stockholders of the Company approve a
merger or consolidation of the Company with any other entity,
other than a merger or consolidation which would result in the
voting securities of the Company outstanding
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immediately prior thereto continuing to represent more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the
Company's assets (other than to a more than fifty percent
(50%) subsidiary or other controlled person of the Company).
(d) For purposes of this Agreement, the term "Exempt Person"
means the Company, any Subsidiary thereof, any employee benefit plan of
the Company or any Subsidiary thereof, any entity holding shares of
common stock for or pursuant to the terms of any such plan, and any
stockholder as of the close of business on the date hereof.
(e) For purposes of this Agreement, the term "Continuing
Director" means a director of the Company who is not an Acquiring
Person or an affiliate or associate thereof or any of their
representatives and who was either a director of the Company before any
person become an Acquiring Person or whose nomination or election to
the board was recommended or approved by a majority of the then
Continuing Directors or by an Exempt Person.
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12. TAXES.
(a) The Company shall have the right to require a person
entitled to receive Shares pursuant to the exercise of this Option to
pay the Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate
for such Shares is delivered pursuant to the Option or the Company may
elect to deduct such taxes from any other amounts then payable in cash
or in shares or from any other amounts payable any time thereafter to
the Consultant.
(b) Subject to Board approval, or Committee approval if one
has been appointed, the Consultant may satisfy his tax liability with
respect to the exercise of the Option by having the Company withhold
Shares otherwise issuable upon exercise of the Option; provided,
however, that if the Consultant is subject to Section 16(b) of the
Exchange Act at the time of exercise, such election must satisfy the
requirements of Rule 16b-3.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes
in all of the outstanding Shares by reason of stock dividends, stock splits,
reclassifications, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations, liquidations, or similar
events, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the Shares, or similar transactions or events, the
number and class of Shares subject to the Option hereby granted, the option
price and all of the other applicable provisions thereof shall be
correspondingly equitably adjusted by the Board, or the Committee if one has
been appointed (which adjustment may, but need not, include payment to the
holder of the Option, in cash or in shares, in an amount equal to the difference
between the option price and the then current Fair Market Value of the Shares
subject to the Option as equitably determined by the Board or the
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Committee, as the case may be), as it shall decide in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise be subject to the Option.
14. DELIVERY OF SHARES ON EXERCISE. Delivery of certificates for Shares
pursuant to the exercise of the Option may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Board, or the Committee
if one has been appointed, may, in its sole discretion, require the holder of
the Option to furnish the Company with appropriate representations and a written
investment letter prior to the exercise of the Option or the delivery of any
Shares pursuant to the Option.
15. INVALIDITY OF PROVISIONS. The invalidity or unenforceability of any
provision of this Agreement as a result of a violation of any state or federal
law, or of the rules or regulations of any governmental regulatory body, or any
securities exchange shall not affect the validity or enforceability of the
remainder of this Agreement.
16. WAIVER AND MODIFICATION. The provisions of this Agreement may not
be waived or modified unless such waiver or modification is in writing and
signed by the parties hereto.
17. INTERPRETATION. All decisions or interpretations made by the Board,
or the Committee if one has been appointed, with regard to any question arising
under this Agreement shall be binding and conclusive on the Company and the
Consultant.
18. MULTIPLE COUNTERPARTS. This Agreement may be signed in multiple
counterparts, all of which when taken together shall constitute an original
agreement. The execution by one party of any counterpart shall be sufficient
execution by that party, whether or not the same counterpart has been executed
by any other party.
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19. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and the Consultant has
hereunto set his hand, all as of the day and year first above written.
FANZ ENTERPRISES, INC.
By: /s/ Xxxxxxxxx X. XxXxxxxx XX
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Xxxxxxxxx X. XxXxxxxx XX, Vice President
/s/ Xxxxxxx X. Xxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxx, Consultant
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